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Les nouveaux formats de l’institution

The rise of regulation of the public sector in the United Kingdom

La montée en puissance de la régulation du secteur public au Royaume-Uni
Oliver James
p. 323-339

Résumés

L’État exerce un pouvoir de régulation sur le commerce et sur la société mais également sur ses propres institutions. Grâce à l’élaboration et à l’application de normes, les personnes qui exercent ce pouvoir dans le secteur public gardent leurs distances avec ceux qui font l’objet de leur régulation. Pendant les trois dernières décennies, le pouvoir de régulation au Royaume-Uni s’est accru par rapport au niveau absolu des ressources engagées et aux autres formes de contrôle (notamment le contrôle du secteur public par ses propres professionnels et le contrôle interne des grandes bureaucraties intégrées). Ces tendances se trouvent renforcées, d’un côté, par les tentatives des hommes politiques qui cherchent à contrôler les services publics et, de l’autre côté, par la pression des citoyens et des utilisateurs pour l’amélioration de la qualité et de l’efficacité de ces services. Un bilan des activités de régulation dans le secteur public pendant la dernière décennie a été dressé. Si ce bilan n’est pas aussi élaboré que les Regulatory Impact Analyses conduites dans le secteur privé, il a néanmoins favorisé l’emploi de certaines techniques, dont les pyramides d’application des régulations, ainsi que d’approches fondées sur la prise en compte des risques. — Numéro spécial : Les nouveaux formats de l’institution.

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  • 1 Regulation is sometimes used to mean the institutional forms, such as societal norms and patterns o (...)
  • 2 The literature on regulation of the public sector, on which this paper draws heavily, includes (Hoo (...)

1The term regulation is used in a variety of ways in the context of public and private sector activity.1 Broad definitions are sometimes synonymous with control -the activity of keeping the various elements of a system within some set of desired states. However, narrower definitions define regulation as a specific form of control that uses rules or standards combined with monitoring and enforcement activity as a mechanism of control. Often, some form of collective public or formal state based legitimacy for regulation is taken to be a defining feature of regulatory activity but it is not always seen as top down or imposed by the state. Much attention has focused on self-regulation by organisations involving some form of voluntary co-operation, although usually in the context of public or state interest in the activities. This article draws on a developing literature which suggests that regulation of the public sector, or regulation inside government, is growing in significance in the UK (United Kingdom).2 Regulation is defined relatively narrowly as having three elements. First, the existence of a ‘regulator’ public administration unit (as opposed, for example, to a court or legislative body) with some form of public mandate for its activities. Second, arms length regulation by the regulator based on regulatory standards using monitoring and enforcement action. Third, a degree of organisational separation (of budget, staff and management structures) between the regulator and regulated body.

2The features of regulation of the public sector are institutions in two main senses. First, in a formal sense, as officially mandated standards with regulatory bodies monitoring and enforcing standards for those they regulate. Second, in an informal sense, as patterns of norms of activity by regulators, regulated bodies and others who participate in such systems. The focus on regulation inside the public sector contrasts with the traditional focus on how parts of the public sector regulate the private sector, including various forms of regulatory partnership between the state and the private sector, and the private sector’s attempts at self-regulation.

3For example, the OECD has devoted considerable investment to exploring regulation of private activity (OECD, 1997a; OECD, 1997b). There is a vast academic literature on what has been in broad terms characterized as the ‘regulatory state’ which notes that states are reducing their relative emphasis on state-owned enterprises and public subsidies and instead focusing on regulation using some form of public authority, often in the hands of specialized agencies, to set and apply rules and standards (Majone, 1994). The regulation of business, particularly utilities, has attracted much attention (for surveys see Wilson, 1980; Hancher and Moran, 1989; Ogus, 1994; Doern and Wilks, 1998). Much less attention has been paid to the idea of regulation within the public sector, as something one part of government does to another part. However, a developing literature has focused on regulation inside government and this article draws extensively on this work.

4The nature of public activity, particularly as distinct from private activity, distinguishes regulation of government from that of the private sector. These categories are often distinguished on the basis of ownership or source of finance. Adopting this convention produces four regulatory domains as shown in Table 1 (see Table 1), with examples of regulators from the UK. Some organisations are common to the public and private sectors, for example in areas of employment, data-protection or safety-at-work regulation. Despite these general regulators, many are specific to bodies in the public, private or mixed sectors.

5Section 1 of this article situates regulation within the historical context of the UK public sector. Section 2 reviews evidence which suggests that this form has become more important over the past three decades. The increase has been both in absolute investment of resources in the activity and in the significance of regulation relative to other forms of control, particularly the alternatives of integrating activity in large bureaucratic organisations and discretionary self-control by public officials. Section 3 seeks to account for the rise of regulation of government, assessing evidence for the official justifications for developments offered by the government which tend to argue that regulatory growth is in the ‘public interest’ against evidence that lends support for explanations that are more sceptical about the general benefits of regulation. Section 4 draws some conclusions about regulation of government and argues that academics and policy makers in the UK are increasingly explicitly recognising regulation’s role as an institution having important consequences for the conduct of public activity. This recognition has led to growing debates about the characteristics of the institutional form, theories about its operation and its design and improvement.

Table 1. Domains of regulation, including regulation of the public sector.

Public Funding

Private Funding

Public Ownership




Core public sector regulated by Cabinet Office, Treasury units and National Audit Office (for bodies in central government), Audit Commission and inspectorates (for bodies in local government or health)

Remaining nationalized industries and trading fund executive agencies regulated by sponsoring central government departments


Private Ownership




Some charities and not for profit bodies (eg universities regulated by higher education funding councils) and private bodies receiving contacts or subsidies (eg Train Operating Companies and the Office of Rail Regulator)

Core private sector firms and other bodies (eg regulated by issue regulators such as the Health and Safety Executive or industry specific regulators such as Office of Gas and Electricity Markets)

Source : (Hood et al., 1999, p. 22).

1. The historical context of regulation of the public sector

6Regulation has long been an important activity within the traditional UK state, although not commonly presented under this label. The traditional state has been dominated by a core executive, a central political authority for steering and co-ordinating public activity composed of the institutions of the Treasury, offices around the Prime Minister, Cabinet and its committees, and the Cabinet Office (Dunleavy and Rhodes, 1990, p. 4; Rhodes, 1997, pp. 14–15). This group of bodies has used a range of rule making powers including orders in council (especially for regulating the civil service), financial and accounting rules developed by the Treasury, and norms such as collective Cabinet responsibility and committee procedures. Development of these systems has enabled these bodies to exert influence over the public sector and beyond, especially when combined with associated tools of giving grants or taking activities into public ownership. More broadly, outside the core executive but within central government, departments have similarly promulgated rules and procedures for the oversight of public bodies including local government, the National Health Service and nationalised industries. In turn, local bodies have developed their own regulatory systems that are more limited in scope and are set within the national frameworks of regulation. To a limited degree, these local regulatory systems have some legitimacy to set, monitor and enforce their own regulations separate from those at the national level. This autonomy has been increased for Scotland, Wales and, in an on/off way, to Northern Ireland since devolution of responsibilities to these countries in the late 1990s.

7As well as regulatory activity associated with the executive, the legislative system has regulatory bodies associated with it. Whilst the activities of the legislature do not count, on the definition used here, as regulation per se (which is instead an executive activity), Parliament has set up a number of regulatory bodies which report to it. Most notable is the regulatory system associated with finance and accounting, including the Exchequer and Audit Department which was originally created in 1866 and exists in its modern incarnation (since 1983) in the form of the NAO (National Audit Office). A key activity of the NAO is to investigate whether expenditure is consistent with legislation and properly spent. The regulators reporting to Parliament were augmented in 1967 when the Parliamentary Commissioner for Administration was set up to investigate allegations of maladministration.

8Regulatory activity is distinct from other forms of control commonly used in the public sector, although it is sometimes found in hybrid form in combination with these other forms (see Hood et al., 1999) for a more extensive discussion). A first alternative form is self-control in which public bodies act alone or in a peer group with freedom from external regulation. This form of control has been traditionally important for professional groups -especially in education, social services and medicine. These public employees have played a part in designing standards of conduct for their activities and some of them, particularly the medical profession, have had a large degree of autonomy in policing these standards. Regulation is distinct from such informal activity but can blur into professional self control if such control occurs in the shadow of public authority, giving rise to the idea of professional self regulation.

9A second form of control is the use of the forces of competition to structure interaction. Whilst competition is often associated with the rise of the ‘NPM’ (New Public Management), it has also traditionally been part of many control systems, for example in the form of competition amongst individuals for promotion or between organisations for jurisdiction in areas of overlapping responsibilities. However, the growth of NPM involved the increased use of competition between providers of services for funding from purchasing authorities, for example in the health sector, and increasing competition between public and private sectors for contracted out work.

10A third form of control is direct management involving hierarchical control of subordinates within an integrated organisation with common staff and procedures. This form is exemplified by the ideal form of a traditional central government department, with a tiered managerial structure and clear procedures for governing administration. Regulation excludes direct ‘chain of command’ management relationships of this kind deployed within an organisation. For these reasons internal audit or review does not count as regulation of government, because it is not conducted by another organisation operating to some degree at ‘arms-length’. Some NPM changes increase the use of arms-length regulation, such as in the executive agency model of a central government department controlling a delivery body at arms-length using budget control and performance targets (James, 2001; James, 2003). NPM also changes the character of some arm-length controls, increasing the use of output measures rather than focusing on input controls. However, the distinction between chain of command control within an organisation and arms-length regulation can be blurred: arms-length regulation is sometimes welcomed by chief executives as a tool for influencing their own organisations, and often works in conjunction activities within departments or agencies.

11Regulation has some similarities with court based oversight of laws affecting the public sector. However, regulators are distinct from judges in lacking the full legal independent status of the judiciary and in often being involved in all elements of standard setting, monitoring and enforcement activity rather than just adjudication. The regulators tend also to be proactive rather than just reacting to complaints which is the mode of working more usually adopted by the judiciary. In the UK context, these distinctions make the dividing line between regulators and the judiciary reasonably clear although in countries with an administrative law tradition the overlap in activities is greater. More generally, even though regulatory administrators may be clearly identifiable, they are often acting in part as the agents of elected politicians, judges or citizens in undertaking their work. For this reason, regulatory systems are embedded in broader systems of political executive, judicial and legislative control.

2. The growth of regulation

12Recent research on regulation of the public sector suggests that this form of control has become increasingly important over the past thirty years, both as measured in absolute investment in the form of activity and relative to other ways of controlling the public sector. This change has occurred at the same time as increased regulation of the private sector with, for example, the establishment of regulators for utility firms at the time of their privatisation, or the expansion of social and environmental regulation. The regulation of the public sector grew since the mid 1970s to cost about £ 1,000m in direct spending on regulators by the mid-1990s. The pattern of growth across the two parts of the core public sector and the mixed public/private sector are summarised in Table 2 (see Table 2). In many cases the growth in ‘arms-length’ regulation occurred alongside a reduction in administrative resources within public organisations as big organisations were split into corporate units (for example with the establishment of local corporate units in health as NHS (National Health Service) trusts were set up (Pollitt et al., 1998). The total staffing of regulatory bodies inside UK government grew by about 90 per cent between 1976 and the mid 1990s. The dramatic staff growth contrasts sharply with what happened to staffing in the public sector as a whole, with a fall of more than 30 per cent in total civil servants and over 20 per cent in local authority staff, although part of this decline arose because of increased use of private sector contractors. The growth in formal regulation also reflects an increased reluctance to rely on self-control by those carrying out public activities. In particular, professional groups such as teachers, healthcare workers and social workers have been increasingly subject to formal oversight by regulatory bodies rather than simply relying on systems of professional self regulation.

Table 2. Growth in regulation of the public sector in the UK 1976–1995.

Number of bodies 1976

Number of bodies 1995

Percent increase

Factor of expenditure growth

1. Core public sector: central government

48

53

10

2

2. Core public sector: local public bodies

57

71

25

2 to 3

3. Mixed public/private sector

5

10

100

4

Total

110

134

22

2 to 3

Source : (Hood et al., 1999, p. 28).

13The trends in regulation differ across parts of the public sector. Taking the first sector in Table 2 as an example, there was a shift to increased reliance on regulatory forms of control under the ‘Next Steps’ executive agency revolution in Whitehall during in the late 1980s and 1990s (James, 2003). The Next Steps reform, part of the NPM reform movement which also increased the amount of competition and private sector involvement in the public sector, involved a move away from reliance on ‘traditional’ integrated departmental forms of central government provision of public services. Executive functions were handed to a group of executive agencies, semi-detached from their parent departments, with their own budgets, freedom from some departmental regulations, freedom from ad hoc, day to day, intervention by the department, and freedom from some central government-wide regulation. This change increased the importance of regulation as a form of control in central government because executive agencies operate within a regulatory framework that makes them accountable for the performance of specific operational tasks as corporate units. The accountability structures include output focused performance targets set by the parent department and personal accountability of chief executives for agency performance. These accountability structures were heavily influenced by reading across an Anglo-American form of business sector corporate governance to the public sector, a model which is concerned about the need to monitor and provide incentives for managers (James, 2001). The Next Steps reform was launched in 1988. By 2001, there were 126 executive agencies with 277,000 civil servants, or 57 per cent of the total working in them. The growth of executive agencies extended and deepened an earlier trend towards use of arms-length bodies in UK government (sometimes called quangos) by bringing this form of organisation to the core of central government services and by sharpening the regulatory arrangements for their oversight by introducing the system of performance targets (James, 2003).

14There was a substantial increase in spending on regulators in the late 1990s under the Labour administration elected in 1997. About a dozen or so major new organisations were created. In particular, substantial new bodies for regulating local government under a regime called ‘Best Value’ and for regulating the health service were established. In healthcare, the Commission for Health Improvement (renamed the Healthcare Commission from the end of March 2004), monitors and reports on the quality of services and units. The overall direct cost of the additional regulators of government appear to add at least around £ 50m per year to the total for direct cost in the mid 1990s, and probably substantially more than this figure. Whilst some of the efforts at decentralising day to day operations of public bodies to local units (such as individual schools or hospitals) that were started in the 1980s and early 1990s have continued since 1997, more emphasis has been placed on the regulatory systems in which they operate to protect minimum standards and to provide mechanisms for central steering of the systems (Hood et al., 2000).

15The new regulatory systems since 1997 have, in particular, been used by the ‘core executive’ in an attempt to increase its influence over the core public sector. The Public Service Agreements regime is a new regulatory system operates as part of the Spending Reviews that decide the allocation of public expenditure. PSA documents are statements of priorities with associated targets that embody the Government’s overall aims and objectives for departments or policy sectors (Chief Secretary to the Treasury, 2000, pp. 1–3). The PSAs are particularly being used as part of the so called ‘delivery’ agenda of improving the performance of public services including health, education, social welfare and criminal justice. The Public Services and Public Expenditure Cabinet Committee (‘PSX’), formally chaired by the Chancellor with the Deputy Prime Minister and Chief Secretary to the Treasury in attendance, discusses the targets suggested by departments. The arrangements entail Treasury authority to intervene to negotiate consistency with the Government’s overall objectives. The PSX Committee has partially integrated the PSA system with the broader Cabinet and Cabinet Committee arrangements within the core executive, although the Prime Minister has his own separate systems for examining strategic priorities, with a Prime Minister’s Delivery Unit set up in 2001 to ensure that the Government achieved its key delivery priorities across the key areas of health, education, crime and asylum and transport. The Unit has strong links with the Treasury but the arrangement offers some potential for conflict through their separate reporting lines, and reflects an uneasy alliance between Tony Blair as Prime Minster and Gordon Brown as Chancellor that has characterized central government operations since 1997 (James, 2004).

16The PSA system provides some incentives for politicians and officials to undertake activities that are particularly valued by the centre of government. However it is difficult to track changes in outcomes because the PSA measures of progress against targets tend to give only a partial reflection of performance against objectives (National Audit Office, 2001, p. 21). It has been difficult to measure performance in many areas with information drawn from a mix of national statistics, academic researchers, public bodies subject to targets and from other regulatory bodies. Secretaries of State are individually responsible for performance against their departments’ targets. In some areas, responsibility is partially delegated to junior ministers or, in areas of joint working, ministers share responsibility for performance. The individual responsibility is partially offset by an element of collective ministerial responsibility for the overall performance of the Government and the system does not suggest that ministers should resign if targets are not met. However, at the very least, assessments of performance would appear to have implications for ministers wanting to progress their careers, particularly in so far as they might affect the Prime Minister’s recommendations about ministerial appointments. The relationship between the responsibilities of ministers and officials were not set out in great detail at the start of the system’s operation. However, the PSA regime was suggested to be consistent with the convention of ministerial responsibility as set out in ministerial and civil service codes. On this basis, senior officials were allocated individual responsibility for particular objectives and targets within the convention of ministerial responsibility. The association between individual officials’ pay and targets was a partial move towards extending the system already in place prior to the PSA system for executive agencies and their chief executives to the Civil Service in general (James, 2003, pp. 3–4).

17The incentive effects of the PSA structures difficult to assess, but various forms of ‘blame game’ have emerged. The ‘blame game’ is the set of interactions between the ‘blamed’, consisting of ministers, officials and others involved in public activity, and ‘blamers’ consisting of legislatures, courts, citizens including service users, and the media. ‘Blame’, or alternatively credit, is allocated as part of systems of responsibility and involves mechanism including providing accounts of performance and being subject to the effects of criticism, sanctions, voting or lobbying. As well as avoiding blame by meeting expectations, which in the case of PSAs would involve meeting targets, other strategies for handling blame are suggested, including managing presentation of performance to avoid blame, blame shifting between groups in the system and changing policies or priorities to avoid the risk of blame (see Ellis, 1994; Hood, 2002).

18All the ’blame game’ strategies have been apparent in the case of PSAs to such an extent that they appear seriously to subvert the intended operation of this part of the system. Individual ministerial responsibility has largely involved only the provision of accounts about particular levels of performance rather than also taking fuller personal responsibility. There has been ambiguity about the implications of failing to meet targets, especially whether targets were set at a level to ’stretch’ and challenge ministers and departments to improve performance or as ’pledges’ of minimum levels of acceptable performance. Failing to meet targets has not generally led to pressure on ministers to resign. Beyond Whitehall departments, responsibility for local performance against targets that contribute to achieving national PSA targets has been allocated to public bodies including hospitals, local authorities and schools and for local units managed by executive agencies. The targets have had some effect in providing incentives to staff in these bodies, but not always in a way desired by the central government (with, for example, hospitals attempting to meet patients’ waiting time targets by compromising standards of treatment).

19The regulators discussed so far in this section have been at least nominally under the supervision of ministers of the government. However, not all developments in the systems of regulation have placed the political executive in a position to increase their influential in the public sector. Instead, some trends have limited the discretion of ministers. A first set of changes were specifically designed to limit discretion. These new bodies included the Appointments Commission which limits the Prime Minister’s discretion in appointments to the House of Lords and the Judicial Appointments Commission which will be involved in the appointment of judges. A more general Public Appointments Commissioner attempts to ensure due process in public appointments more generally and limit the exercise of ministerial patronage.

20There are a further group of regulators which limit executive politicians’ discretion as part of their broader activities to regulate the public sector in general. In this category is the Information Commissioner which combines the old Office of the Data Protection Registrar with regulatory activity arising from the more extensive rules under the new Freedom of Information Act. Whilst judicial activity is not strictly regulation (as discussed in Section 1), it has some of the characteristics of regulatory activity, particularly the evaluation of public sector activity against set standards. There has been a marked increase in judicial review of the public sector, and clearer specification of administrative review within overall judicial activities. The Human Rights Act has added impetus by increasing the scope of legislation affecting public activity. In addition, the traditional position of Civil Servants as servants of the Crown and, as such, regulated under Orders in Council made by the executive without reference to Parliament is under threat. The calls for a Civil Service Act grow louder and louder. Passing of an Act would further limit executive autonomy and increase the potential for judicial intervention in central government. Legislative politicians have similarly not been immune to increased regulation; they are now subject to the Parliamentary Standards Commissioner who oversees a set of rules for the conduct of these individuals.

3. Explaining the growth of regulation

21The UK Government’s justifications for the reforms are fragmented and do not amount to an overarching, theoretically informed, rationale. However, the dominant official explanation for recent regulatory initiatives in UK has been that regulatory developments have been in the ‘public interest’, producing benefits for a broad group of taxpayers and service users. Explicating this public interest justification is a worthwhile exercise to try and understand the Government’s thinking on its own terms. It is even more significant because, whilst the public interest theory of business regulation has been heavily criticised, the public interest theory of regulation inside government has not been subject to close scrutiny. The literature on the regulation of business suggests that the potential exists for a number of regulatory failures which mean that regulation is perhaps not as effective as might be argued by some of its advocates (James, 2000).

22The public sector justification for regulation suggests that, in a similar way to regulation of markets being justified to combat ‘market failure’, there is a need for regulation to overcome government failures. On this account, government failure occurs where co-ordination and control mechanisms in the public sector end up favouring narrow privileged groups rather than the users of public services and taxpayers. In the public interest account, each of the control forms outlined in Section 1 as alternatives to regulation (self-control, competition and hierarchical management in an integrated organisation) are prone to different government failures, leading to a need for regulation. Self-control is the least suitable form for dealing with self interested behaviour when these interests clash with the broader interests of taxpayers or service users. Both self control and competition based quasi-market controls have difficulties in dealing with externalities, the incentive in these systems is for organisations to pursue their own goals regardless of the impact on others. Competition can help encourage competition which makes ‘agents’ more keen to please their ‘principals’ and can give the ‘principal’ more information about ‘agents’ potential performance, if the market does not suffer from monopoly provision and information problems. Hierarchy and chain of command control is most successful way to deal with externalities, by internalising them within a single organisation, allowing goals to be harmonised and encouraging information sharing, and can allow closer monitoring of agents. However hierarchy imposes costs of its own through reduced flexibility, for example those located in its lower echelons typically have to refer decisions up the line rather than acting on their own initiative.

23In the public interest account, regulation can help mitigate government failures. Monitoring by regulators helps penetrate information asymmetry, exposing fraudulent and wasteful behaviour by external verification of costs and producing evaluations of the quality of services. This justification has been an important part of government justifications for expanding regulation in local government and health. Prime Minister Blair noted that the regulation of local government promotes efficiency and makes sure that a ‘modern’ government for the British people is developed (Blair, 1998, pp. 1–3). The regulatory developments sat within a broader ‘centrist’ agenda in which the ‘New Labour’ government attempted to steer a ‘third way’ which was neither a return to integrated bureaucratic structures nor a further radical extension of the market (for more on the ‘centrist’ agenda see (Hindmoor, 2004). However, the previous Conservative administration similarly sought to increase the use of regulation, particularly to challenge traditional producer groups within the public sector. The education profession were particularly noted as requiring external pressure to drive up quality and were subject to a new formal and comprehensive cycle of inspections of every state school centred on the activities of the OFSTED (Office for Standards in Education).

24As well as pressures within the state, the desire for more rigorous regulatory monitoring of public sector activities appeared to reflect rising public concern with the operation of the public sector. Between 1981 and 1990 confidence in the education system declined from 60 per cent to 47 per cent, confidence in the police declined from 86 per cent to 77 per cent, whilst confidence in the Civil Service exhibited a smaller decline from 48 per cent to 44 per cent (Listaug and Wiberg, 1995, pp. 304–305). The relationship between these figures and the rise in regulation is not straightforward but appears at least to show that the public were increasingly skeptical of the traditional public sector —and the largest increases in formal regulation occurred in education which exhibited the greatest decline in confidence. In addition, there were specific incidents in which public professionals were heavily criticized in the media for acting with too great a degree of autonomy and without sufficient regard to the concerns of service users. These cases were notably in health-care, where doctors were criticized for retaining the organs of patients in hospitals, for poor standards of care —especially in a scandal relating to heart surgery at the Bristol Royal Infirmary in the late 1980s and early 1990s, and in social services —where children were taken into care on the basis of interpretations of abuse by social services professionals. In each case, not only did the public, media and politicians express dissatisfaction with the conduct of public workers but demands were made for stricter regulation as a solution.

25A second justification for increased regulation of government in the ‘public interest’ account is to improve the treatment of externalities by regulators introducing rules to encourage organisations to take account of their activities on other bodies and through regulators spreading information about the effects of different bodies’ actions on other parts of the public sector. The Labour administration developed a strategy to reign in some of the undesirable effects created by the previous administration’s embrace of competition as part of NPM reform. This issue became a key theme of the Modernizing Government White Paper of 1999 and the Treasury Comprehensive Spending Review of 2000. The Government argued that the Commission for Health Improvement would contribute to a ’one nation’ health service where the concerns of the whole system rather than just individual hospitals would be taken into account (DoH, 1998). Similarly, the PSA system was intended to create an over-arching framework for coordinating regulatory systems and regulated bodies to ensure ’joined-up’ working that takes account of the need for public bodies to work collaboratively to solve policy problems.

26A third justification for regulation in the ‘public interest’ account is cases where hierarchy is undesirable because of the associated inflexibility. This justification for reform was used in the case of Next Steps, where reformers suggested that they were trying to combine the flexibility of giving agencies freedom to manage with the strategic direction offered by systems of performance targets set by the department (James, 2003). The same rationale appears to be invoked by the more recent efforts in the Treasury to set up the system of PSAs. In this case, the Treasury is trying to establish overall direction of the public sector system using a few key targets whilst leaving day to day activities to the discretion of individual public bodies.

27There are good reasons to question the public interest account of regulation of the public sector. The analogous account of the regulation of business has been strongly attacked. Studies of the regulation of business suggest that, rather than producing benefits for the public interest, the growth of regulation is often the result of sectional interests and it produces undesirable consequences for general welfare. These critiques suggest three main types of regulatory failure: regulation in the interest of regulated bodies, regulation in the interest in regulators and regulation as a costly enterprise even if attempts are made to pursue the public interest. The failures are not fully mutually exclusive; in particular, the benefits for both regulators and regulated bodies from collusion against the public interest are possible.

28Theories of regulatory ‘capture’ suggests the first kind of failure, with the interests of the regulated bodies causing regulation to develop and grow (Stigler, 1971). Demand for regulation inside government is characterised as coming from incumbent producers supplying public services. On this basis, regulation will reflect cosy cartels rather than a challenge to public sector workers to improve performance. This model was perhaps consistent with systems in which members of the same profession or specialist group were regulating as well as being subject to regulation. Such system existed in the traditional model of government inspection that existed in education, social services, the fire service, police and the health sector prior to the 1980s. However, the model does not appear consistent with more recent developments in the UK, where new regulatory initiatives have tended to be viewed with hostility by those subject to them (such as the more formal system of schools inspection).

29An alternative set of theories about regulatory failure suggest that regulation may develop in the interests of regulators. A model suggesting ways in which regulators benefit from regulatory developments is Majone’s (Majone, 1994) account of the rise of the regulatory state in Europe. Majone suggested that the increase in the scope and complexity of EU regulation was partly the result of it being one of the few available channels for ambitious officials in the Commission seeking to build their careers. Tight restraints on policies involving spending means expansion regulation is one of the few ways for the EU Commission to increase its role. There is some evidence for similar processes existing in the UK, with new spending initiatives being especially under attack during the 1980s. In the 1990s, the incoming Labour government’s concern with wanting to ameliorate some of the problems with structures they inherited from the previous Conservative administration were addressed by proposals from their officials to undertake regulatory initiatives. The notion of a ‘regulated public sector’ is an accurate characterisation of the UK government’s policy position since 1997.

30The third type of regulatory failure suggests high costs in running the regulatory regimes. In regulation of business, Scholz (Scholz, 1991) models enforcement and compliance between a regulator and regulated firm as a ‘Prisoner’s Dilemma’ game. The relationship between regulator and regulated body takes the form of a ‘deterrence’ equilibrium (with the regulator adopting a harsh enforcement policy and regulated bodies adopting a minimal compliance policy) or a ‘voluntary compliance’ equilibrium (with flexible enforcement and compliance policies adopted). Under some conditions of repeated ‘plays’ of the game, the regulator and regulated body may be able to agree ‘voluntary compliance’ strategies. The temptation for one or both players to ‘defect’ to their individually preferred strategies, which tend towards the costly deterrence equilibrium, will still remain. However, this model does not seem to fit regulation of government in the UK. Most parts of the public sector regulatory system seem to exhibit a voluntary compliance equilibrium with something of a culture of compliance in many areas. Whilst some bodies fail to comply, with a few rogue local authorities, hospitals or schools, must public sector workers act in ways consistent with regulation. In fact, regulated bodies may almost be too keen to comply with what might be regulations that limit their ability to provide services to users in the most effective way. The current concern about the cost and effectiveness of the regulatory systems, rather than being centred on problems of compliance, is more about whether compliance with the regulations leads to improvements (in other words, whether the regulations are the correct ones) and whether regulation as a form of control is the most suitable for the circumstances relative to other ways of exercising control.

4. Conclusion: reflexive regulation

31The discussion of the reasons for the growth of regulation inside the public sector suggests that the simple ‘public interest’ account should be viewed with some scepticism and that regulation in the public sector is inherently political –involving conflict between many stakeholders. However, there are some grounds for thinking that UK governments may be developing a more nuanced understanding of how to improve regulation and how to improve processes for considering regulatory reform. Historically, the systems for assessing regulation inside government have been fragmented. There has been no central point for assessing the overall system (for example, to identify gaps and overlaps, to challenge regulators to justify their actions, to promote learning). However, greater awareness has recently developed and this has been reflected in new projects to evaluate regulatory systems (for example see the Public Services Productivity Panel, 2001; Martin et al., 2003) and the development of principles for the regulation of government. The increased self-awareness of those running regulatory systems has lead to several attempts to streamline regulation. The Regulatory Reform Act of 2001 enables ministers, subject to scrutiny by Parliamentary Committees, to remove or reduce regulatory burdens in both the public and private sectors. This change potentially acts as a challenge for regulators to justify the use of regulation in particular contexts.

32Units within the government that normally focus on regulation of the private sector have also turned their attention to regulation within the public sector. The Regulatory Impact Unit created a Public Sector Team to assess regulation of the public sector. This team has developed some analogues to RIA (Regulatory Impact Analyses) which is widely acknowledged as being desirable for initiatives that introduce new regulatory requirements for business. The RIA is a form of broad cost benefit analysis within a structure that allows the involvement of relevant stakeholders and continuing review. The guide for RIA in the context of the public sector was set out as the Policy Effects Framework. The framework was developed under a number of different titles (including the ‘regulatory effects framework’) and was adopted in Summer 2002 as a voluntary measure for departments dealing with the public sector. The aim is stated as assisting the development of policies at an early stage by a consideration of how aims of policy can be achieved within the minimum possible burden on those affected by it. The framework introduces ex ante consideration of regulatory burdens and benefits of legislation (both primary and secondary), administrative rules and procedures and requests for information. The initial use of the framework has been in education and the police, although it is hoped to expand its scope. However, much of the Public Sector Team’s time has been spent on a narrower analysis of reducing ‘unnecessary’ paperwork for so called ‘front-line’ staff. Reports have examined ways of reducing police, school, and General Practitioner (local doctor) paperwork, and burdens in local government, hospitals, the criminal justice system and railways (Regulatory Impact Unit, 2002). However, a focus on the costs of regulation risks an analysis that is incomplete because it fails to consider costs alongside benefits, and it is still true to say that regulation of the public sector is still subject to less formal scrutiny than regulation of the private sector.

33Despite limitations of some of the analysis, the reviews of regulatory systems have involved the development of new models for regulating the public sector. Issues of design and improvement have focused on the merits of different techniques of regulation and the use of regulation relative to alternative forms of control. This latter debate has been dominated by a schism between those seeing regulation as a remedy for ‘failure’ in the public sector and those suggesting that ‘regulatory failure’ is itself a substantial problem. There are a large number of sub-debates exploring these issues in different parts of the public sector with occasional ‘crises’ involving intense discussion and reform of regulatory systems. However, whilst there is increased recognition of some of the general issues around the use of regulatory forms there is little evidence of a general ‘crisis’ of confidence in the use of regulation as a form of control.

Fig. 1. The regulation inside government pyramid.

Fig. 1. The regulation inside government pyramid.

34A more systemic approach to regulation has been developed arising from the recognition that individual regulatory systems have often grown in an ad hoc way without sufficient regard to the consequences for individual public sector units that find themselves faced with an array of regulators. At the same time, it has been noted that some regulatory systems have not been sufficiently developed and have tended to concentrate regulated bodies on too narrow a set of tasks. The undesirable systemic effects of some executive agencies’ performance targets, which had given the agencies too narrow a view of their remits, were increasingly recognized towards the end of the 1990s (James, 2003). The regime of Public Service Agreements in part reflected this concern by bringing all of central government under a system-wide performance regime to reduce fragmentation and ’join-up’ systems for different departments and agencies.

35The use of ‘enforced self-regulation’ has been explored as an alternative to conventional direct regulation. In this system (set out in Fig. 1), different forms of regulation are arranged in the form of a pyramid, with self-regulation at the bottom, more interventionist forms of regulation at higher levels and the most interventionist forms at the apex. Bodies that are seen as persistent poor performers meet forms at the top of the pyramid, whereas good performers are rewarded with lighter oversight regimes. The use of this model has been noted in the regulation of the private sector (Ayers and Braithwaite, 1992). The UK experienced a trend towards greater formality in regulation of many public bodies in the 1980s and 1990s (especially for local government and the health sector), in the sense of less involvement of regulated bodies in regulatory decision making and more formal sanctioning rather than persuasion (Hood et al., 1999, pp. 194–197). However, Government has more recently sought partly to moderate this trend. The Modernizing Government White Paper stated a desire to intervene in inverse proportion to public bodies’ success and to strike an appropriate balance between intervening where services are failing and giving successful organisations freedom to manage. The aspiration of ’enforced self-regulation’ was incorporated in the Best Value regime for regulating local authorities. Under this regime, poor performers are subject to direct intervention whilst good performers are given some exemptions from regulatory systems.

36Another recent initiative has sought to increase the use of risk assessment in regulatory systems as a way of identifying potentially poor performers, including the use of risk assessment as part of the enforcement pyramid. The risk based regulatory system identifies more or less risky organisations (in terms of the likelihood of them failing to deliver aspects of a public service) to enable bodies to be classified as requiring different levels of monitoring or intervention. These assessments can include how organisations subject to regulation themselves manage risk. This risk based approach enables a prospective rather than just a backward looking approach and allows a differentiated treatment for regulated bodies. In the context of local government, authorities given an excellent score as part of the Comprehensive Performance Assessment process (a process which draws on a range of scores and measures from the Best Value system) were promised more freedom to carry out their tasks than average or poor performers. Although there has been some disappointment with the limited freedoms that have emerged in practice the regulatory system is slowly moving towards a more differentiated approach.

37The trend towards greater analysis of, and reflection about, regulation of the public sector has clarified some of the trade-offs involved in the use of different regulatory systems (for example, involving different degrees of formality of external oversight). However, the increased assessment of regulation has been conducted at the same time as an opening up of the debate from one conducted by technicians within the system to one including other groups, notably opposition politicians, public sector staff involved in delivery, service users, citizens and the media. There is now much more interest in the question of ‘who regulates the regulators?’ and the accountability of regulatory system. The publication of performance information gathered by the regulatory system has further increased the interest of non-state actors in the operation of regulatory regimes. The PSAs were described by the Government as ‘a contract with the people’ because ‘by making clear what is expected from each of our public services the PSAs add a new dimension to public accountability’ especially for the ‘delivery’ of public services (Chief Secretary to the Treasury, 1999). Whilst the Government’s presentation of its performance against these targets might be viewed with some scepticism, the public’s interest in regulatory systems seems unlikely to diminish.

38It is perhaps unsurprising that the debate about regulation has not led to a clear consensus on which way systems should develop because the stakeholders have frequently had different interests about outcomes of the system. In particular, a tension has developed between executive politicians wanting to keep control over regulators and demands from legislative politicians and some service users and regulated bodies to make the regulators more independent. The regulated bodies fear political intervention in an ad hoc manner making their task of achieving previously set goals more difficult. Legislative politicians and service users fear that the information published by regulators about public services may not reveal the true picture because elected politicians may seek to put a positive ‘spin’ on performance. Such developments appear to be undermining the credibility of the system of targets and measures in Public Service Agreements, many of which are seen as too easily manipulated by politicians. Research on regulation as a phenomenon in the public sector at least offers the hope of enabling the discussion of these issues to proceed in a way that is informed by some basic concepts, measures, understanding of processes and the effects of different forms of regulation.

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Notes

1 Regulation is sometimes used to mean the institutional forms, such as societal norms and patterns of strategic conduct, that seek to contain social conflicts in a capitalist society (Aglietta, 1979), but it is not used in this general sense here.

2 The literature on regulation of the public sector, on which this paper draws heavily, includes (Hood et al., 1998; Hood et al., 1999; Hood et al., 2000; James, 2000; Boyne et al., 2002; James, 2003; Hood et al., 2004; James, 2004).

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Table des illustrations

Titre Fig. 1. The regulation inside government pyramid.
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Oliver James, « The rise of regulation of the public sector in the United Kingdom », Sociologie du travail, Vol. 47 - n° 3 | 2005, 323-339.

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Oliver James, « The rise of regulation of the public sector in the United Kingdom », Sociologie du travail [En ligne], Vol. 47 - n° 3 | Juillet-Septembre 2005, mis en ligne le 08 octobre 2005, consulté le 28 mars 2020. URL : http://journals.openedition.org/sdt/26631 ; DOI : https://doi.org/10.4000/sdt.26631

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Auteur

Oliver James

Department of Politics, School of Historical, Political and Sociological Studies, University of Exeter, Exeter EX4 4RJ – UK
o.james[at]ex.ac.uk

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